With the Government's focus to increase housing stock, the latest announcements haven't come entirely unexpected. Consultation papers confirmed that the new builds are likely to be exempt from new tax rules. It looks like property investors would still be able to claim interest as a deduction and the bright-line test will be kept at 5 years.
What surprising is how broad the definition of the "new build" is.
It looks like a "new build" will go beyond a brand new house built on a vacant piece of land. The property should also be considered a "new build" when:
- a self-contained dwelling (with its own kitchen and bathroom) which had been added to residential land (this can be stand-alone or attached to the existing property)
- a house replacing an existing house.
- a house renovated to create two (or multiple) houses
- a commercial property converted into apartments
The Government proposes a property be considered “new” for 20 years from the time its code of compliance certificate is issued.
The consultation papers also suggest that the exemption will apply to the following:
- the family home
- the owner-occupier with flatmates
- commercial properties (e.g. motels)
- employee accommodation
- care facilities (e.g. nursing homes)
- land outside New Zealand
Under further consideration are short-stay accommodation that is not substitutable for long term accommodation (e.g. student accommodation and serviced apartments)
Members of the public are encouraged to make submissions until July 12.
This change will take effect from October 1 2021, for properties bought after March 27, 2021.
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